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So what did Joseph Dostal accomplish? It appears that he lost but did he? On March the 19th 2003 the IRS was breathing down his neck and on the verge of taking levy action. He timely requested a due process hearing. After rejection of the offer at the due process hearing he filed a timely petition in the tax court. The court finally ruled against him on November 16th, 2005. The decision will not be final for another 90 days from that date.
You might say that Dostal did not loose entirely. What he did win was alomost two years to get his affairs in order to deal with his tax debt, and solve his tax problems with the IRS. This could have given him time to raise the money or to do some future income planning.
JOSEPH G. DOSTAL, Petitioner v. COMMISSIONER OF INTERNAL
REVENUE, Respondent
No. 13090-04L
UNITED STATES TAX COURT
T.C. Memo 2005-264; 2005 Tax Ct. Memo LEXIS 262
November 16, 2005, Filed
COUNSEL: [*1] Robert M. Clegg, for petitioner.
Catherine L. Campbell, for respondent.
JUDGES: Whalen, Laurence J.
OPINIONBY: LAURENCE J. WHALEN
OPINION:
MEMORANDUM OPINION
WHALEN, Judge: Respondent issued a notice of determination
concerning
collection action(s) under section 6320 and/or 6330 (notice of determination)
sustaining a levy on petitioner's property to collect unpaid taxes for
taxable
years 2000 and 2001. (Section references in this opinion are to the Internal
Revenue Code, as amended, unless stated otherwise.) The issue for decision
is
whether the Appeals officer who made the determination abused her discretion
by
rejecting an offer-in-compromise made on petitioner's behalf.
Background
The facts set out herein are taken from the stipulation
of facts filed by the
parties and the exhibits referred to therein. The stipulation of facts
and the
exhibits filed by the parties are incorporated herein. Petitioner resided
in the
State of Washington at the time his petition in this case was filed.
Petitioner filed his separate individual income tax
return for taxable year
2000 on or about October 15, 2001, wherein he reported total tax of $
137,465
and zero payments. As of March 13, 2003, petitioner [*2] owed $ 143,165.96
with
respect to taxable year 2000.
Petitioner filed his separate individual income tax
return for taxable year
2001 on or about October 12, 2002. In that return, he reported total tax
of $
51,622 and Federal income tax withholding of $ 10,692, for balance owing
of $
40,930. As of March 13, 2003, petitioner owed $ 45,675.28 with respect
to
taxable year 2001. Petitioner's tax returns for taxable years 2000, 2001,
2002,
and 2003 are summarized in the appendix hereto.
On or about March 18, 2003, respondent sent to petitioner
a Notice of Federal
Tax Lien Filing and Your Right to a Hearing Under IRC 6320 which stated
that a
notice of Federal tax lien had been filed with respect to taxable years
2000 and
2001 in the amounts of $ 143,165.96 and $ 45,675.28, respectively.
On the following day, March 19, 2003, respondent sent
to petitioner a final
notice, Notice of Intent to Levy and Notice of Your Right to a Hearing,
with
respect to the amount petitioner owed for taxable year 2000. On the same
date,
respondent sent a similar notice with respect to the amount petitioner
owed for
taxable year 2001.
In response, petitioner timely filed a request for
[*3] a collection due
process hearing. Petitioner's request for a hearing indicates his disagreement
with respondent's "Notice of Levy/Seizure". The hearing request
does not
indicate petitioner's disagreement with the notice of Federal tax lien.
Petitioner's hearing request sets out the following reasons for his disagreement
with the notice of levy/seizure:
Notice of Levy/Seizure
1. The tax payer [sic], Mr. Joseph Dostal, files
this Collection
Due Process Hearing based on the grounds that he anticipates
an
Offer in Compromise disputing the collectability of
the herein
mentioned tax but does not dispute the amount of liability;
2. Tax Payer [sic] is currently experiencing financial
hardship
and a levy it is felt would constitute a substantial
hardship
for tax payer [sic] and his family;
3. Upon further examination, taxpayer should be placed
in "non-
collectability status" during the pendency of
this appeal.
As contemplated in his request for hearing, petitioner
submitted an
offer-in-compromise approximately 4 months later on August 20, 2003. Petitioner
offered to pay $ 20,000 to compromise [*4] the tax liabilities, plus any
interest, penalties, additions to tax, and additional amounts required
by law
with respect to his individual income tax for tax years "2000, 2001
& 2002". As
the reason for submitting the offer-in-compromise, petitioner checked
the box
entitled "Effective Tax Administration", which states as follows:
"I owe this amount and have sufficient assets
to pay the full
amount, but due to my exceptional circumstances, requiring
full
payment would cause an economic hardship or would be
unfair and
inequitable." You must include a complete Collection
Information
Statement, Form 433-A and/or Form 433-B and complete
Item
9.
Contrary to petitioner's hearing request, petitioner's
offer-in- compromise
did not raise doubt as to collectibility as the basis of the offer.
Attached to petitioner's offer-in-compromise is a Form
433B, Collection
Information Statement For Businesses, for J. Dostal Investments, Inc.
That form
reports that J. Dostal Investments, Inc., had business assets of de minimis
value, consisting of a computer and office furniture, a checking account,
and
two brokerage accounts. Section 7 of the form lists [*5] the following
income
and expenses:
Total Income Gross
Total Expenses Actual
Source
Monthly Expense Items
Monthly
____________
_______ ______________
_______
19. Gross receipts $ 295,498 27.
Materials purchased
20. Gross rental income
28. Inventory purchased
21. Interest 29.
Gross wages & salaries $ 76,770
22. Dividends
30. Rent 6,300
Other income (specify
31. Supplies
in lines 23-25)
32. Utilities/telephone
23.
33. Vehicle gasoline/oil
24.
34. Repairs & maintenance
25.
35. Insurance
(Add lines 19
36. Current taxes 13,121
through 25)
Other expenses
26. TOTAL INCOME [*6]
295,498 (include installment pay-
ments,
specify in lines
37-38)
37.
Statement 1, depreciation 26,447
38.
Pension, interest expense 12,315
(Add
lines 27 through 38)
39.
TOTAL EXPENSES 134,953
Section 7 of Form 433-B calls for "monthly"
income and expenses. However, the
income and expenses set forth on Form 433-B appear to be computed on an
annual
basis. The amounts set out on the form correlate with the income and expenses
reported on the income tax return filed on behalf of "J Dostal, Investment
[sic], Inc." on Form 1120S, U.S. Income Tax Return for an S Corporation,
for
taxable year 2002. That tax return reports gross receipts of $ 295,498
and total
deductions of $ 134,953 for ordinary income of $ 160,545.
Also attached to petitioner's offer-in-compromise is
a Form 433- A, [*7]
Collection Information Statement for Wage Earners and Self- Employed
Individuals, for petitioner and his wife. That form lists the following
monthly
income and expenses for the couple:
Total Income Gross
Total Expenses Actual
Source
Monthly Expense Items
Monthly
____________
_______ ______________
_______
24. Wages (yourself) $ 5,400 35.
Food, clothing and misc. $ 800
25. Wages (spouse) 36.
Housing and utilities 1,942
26. Interest-dividends 37.
Transportation
990
27. Net income from business 38.
Health care 560
28. Net rental income
39. Taxes (income and FICA)
29. Pension/Social Security
40. Court ordered payments
(yourself)
30. Pension/Social Security
41. Child/dependent care
(spouse)
31. Child support
42. Life insurance
(Spouse)
32. Alimony
[*8] 43. Other secured debt
500
33. Other
10,000 44. Other expenses
600
34. Total income 15,400
45. Total living expenses 5,972
Thus, the Form 433-A petitioner filed suggests that
his income exceeds living
expenses by $ 9,428 per month before income taxes. Form 433-A also lists
the
following assets owned by petitioner and his wife:
Checking accounts
Checking account (******** 1731)
$ 825
Checking account (****** 63) 20
$ 845
Brokerage accounts _____
Brokerage account (****** 31CK) 9,000
Brokerage account (****** 07) 541
9,541
Investments
National securities SEP IRA
60,000
US Bank SEP IRA
14,000 74,000
Automobiles ______
Lexus, 2000
23,000
Loan
-28,000
Kia, 1998 [*9] 2,000
Loan -3,000
Ford truck, 1968
1,500
_______
-4,500
Real estate
Arlington, VA residence 500,000
Loan -450,000
25,000
Personal assets ________
Furniture/personal effects
8,900
Jewelry 500
9,400
Business assets ______
Office furniture
2,000
Item 9 of the offer-in-compromise asks the taxpayer
to set forth the reasons
the offer-in-compromise is requested. In response, petitioner's
offer-in-compromise refers to a cover letter written by petitioner's attorney.
In that letter, petitioner's attorney states as follows:
Mr. [*10] & Mrs. Dostal do not dispute the amount
owed and admittedly
have sufficient assets and means to pay this amount,
within the
short-term, but due to several mitigating factors,
and their
need for these funds to be used for his and his family's
needs,
it would be and would indeed cause a sufficient economic
hardship for my clients and their family members.
Petitioner's attorney repeats his contention that petitioner
cannot part with
the funds necessary to make full payment because those funds will be needed,
after his retirement, to satisfy his medical and living expenses and to
support
him, his wife, and his children. Petitioner's attorney states as follows:
given Mr. Dostal's age and retirement needs, future
and current
medical and living costs, and projected retirement
needs, he is
required to contribute a certain amount to his retirement
accounts to insure a modest living standard for himself,
his
wife, and children.
Petitioner's attorney summarizes petitioner's position as follows:
Considering Mr. Dostal's age, his future financial
and health
needs, his spouse and children's [*11] future financial
needs, it is
clear that any and all savings, retirement savings
and the like,
will be needed, and spent toward their support, and
the future
support of their children. The amount of taxes owed,
the
Dostal's [sic] present and future financial needs,
Mr. Dostal's
few remaining years or months of employment remaining
[sic], and
their family support needs, warrant approval of this
Offer in
Compromise.
Petitioner's attorney emphasizes that petitioner had
incurred unsecured debt
in the aggregate amount of approximately $ 203,000 and had monthly medical
expenses of approximately $ 1,000, consisting of medical insurance payments,
copays, and costs of prescription medications. Petitioner's attorney suggests
that petitioner's total monthly expenses are as follows:
Health insurance premium
$ 560.00
Uninsured medical expenses
600.00
Unsecured debt finance charge 2,368.33
($ 203,000 at 14 percent)
Other expenses
3,000.00
_________
Total expenses [*12] 6,528.33
Petitioner's attorney does not reconcile the above
monthly expenses with
those set forth on Form 433-A attached to the offer-in- compromise, which
shows
total monthly living expenses of $ 5,972.
Petitioner was approximately 63 years of age when the
offer-in- compromise
was submitted on his behalf. He was self-employed as a stock broker. He
operated
his business through a subchapter S corporation, J Dostal Investments,
Inc.,
often referred to as J Dostal Investment, Inc. Petitioner's wife, Teresa
Dostal,
formerly Teresa S. Fisher, was approximately 35 years of age at the time
the
offer-in-compromise was submitted. Ms. Dostal was vice president of J
Dostal
Investments, Inc., and owned 50 percent of that entity. She had a son,
Adam, and
a daughter, Natalie, who were 11 and 9 years of age, respectively, when
the
offer-in-compromise was submitted.
In due course after submission of petitioner's offer-in-
compromise, the
Appeals officer wrote to petitioner stating that she had been assigned
petitioner's hearing. In her letter, the Appeals officer noted that petitioner
had submitted an offer-in-compromise, and she said that the offer would
be
"considered [*13] as a part of your collection due process hearing".
In that
connection, the Appeals officer stated as follows:
I have reviewed your offer and the financial documentation
submitted by your representative. It does not appear
based on
upon [sic] the provisions, conditions and examples
provided in
the Internal Revenue Regulations section 301.7122-1(c)(3)
and in
the Internal Revenue Manual section 5.8.22.2(4), that
you
qualify for an Effective Tax Administration Offer in
Compromise
due to economic hardship. I will be happy to discuss
other
alternative collection options with you, such as an
installment
agreement.
Petitioner's attorney met with the Appeals officer
in her office on April 20,
2004. Following that meeting, petitioner's attorney sent the Appeals officer
a
letter dated May 5, 2004, transmitting various documents which the Appeals
officer had requested. Among the documents were statements from two brokerage
firms, National Securities Corp. and Piper Jaffray, which show that as
of March
31, 2004, petitioner and his wife had brokerage accounts valued at $ 179,836.67,
as follows:
[*14]
3/31/04
__________
National Securities Corp., acct. for Teresa S. Fisher
$ 2,145.00
National Securities Corp., acct. for Joe Dostal
139,580.70
Piper Jaffray, acct. for Joe Dostal
3,484.70
Piper Jaffray, retirement acct. for Joe G. Dostal 34,541.63
Piper Jaffray, acct. for Teresa S. Fisher 84.64
__________
179,836.67
In his letter of May 5, 2004, petitioner's attorney,
among other things,
disclosed to the Appeals officer that "Mr. Dostal has a tax liability
for 2003,
of roughly $ 70,000.00 and intends to pay this with funds on hand; namely,
funds
from his retirement account(s)."
At that time, petitioner had requested the first of
two extensions to file
his return for 2003. Petitioner's return would not be filed until on or
about
October 14, 2004, more [*15] than 5 months later. As filed, the return
reported
total tax of $ 11,575 and Federal income tax withholding of $ 6,415, leaving
an
amount due of $ 5,160. See appendix. The record does not explain why petitioner
's attorney advised the Appeals officer that petitioner's tax liability
for 2003
was $ 70,000.
Shortly thereafter, during a telephone conference,
the Appeals officer
advised petitioner's attorney that she could not consider petitioner's
offer-in-compromise, as a collection alternative because petitioner had
incurred
unpaid tax liabilities for tax year 2003. The Appeals officer gave petitioner's
attorney a short time to request another collection alternative. In response,
petitioner's attorney proposed that petitioner enter into an installment
agreement. The Appeals officer responded that certain conditions must
be met
before she would consider an installment agreement. These included "payment
in
full for the amount determined to be owed for the tax year 2003, including
the
estimated tax penalty computed to be due", a substantial payment
of petitioner's
tax liability for taxable years 2000 and 2001, and submission of copies
of the
Forms W-2, Wage and Tax Statement, for petitioner [*16] and his wife for
taxable year 2003. Petitioner's attorney notified the Appeals officer
that
petitioner could not meet the specified conditions for entry into an installment
agreement.
In due course, the Appeals officer issued her determination
that "the Notice
of Intent to Levy and the proposed collection action was appropriate."
In an
attachment to the notice of determination, the Appeals officer summarized
her
discussions with petitioner's attorney, the most significant of which
are
summarized as follows:
During our conference, we advised that you did not
qualify for
an ETA offer [an offer in compromise based upon Effective
Tax
Administration] because you had not demonstrated that
you had
an undue hardship as defined under the Code of Federal
Regulations Section 6343-1. We advised that you had
the ability
to full pay your tax liability and we proposed that
your
representative ask you to consider an installment agreement
and/or liquidation of your retirement accounts in order
to
satisfy the tax liability. We asked your representative
to
provide us with some additional documentation which
included [*17] a
draft of your Form 1040 for 2003. We advised that you
could not
owe a balance due if you still wished to pursue an
offer.
On May 10, 2004 we received some additional documentation
from
your representative. In his cover letter, your representative
advised us that you were going to owe $ 70,000.00 for
the tax
year 2003 and intended to pay the amount due with funds
from
your retirement accounts.
On May 19, 2004 and May 25, 2004, we held telephone
conferences
with your representative and advised that we could
no longer
consider an offer because you had not complied with
your payment
requirements and had incurred another liability while
your offer
was being considered. We noted that the current balance
in your
retirement accounts was approximately $ 178,000.00.
Your
representative asked if you could enter into an installment
agreement. We advised that we would consider an installment
agreement if you paid your 2003 tax year in full, made
a
substantial payment towards your tax liability for
2000 and
2001, and provided some missing documentation [*18]
in order to
determine the precise amount of your monthly installment
payment. * * *
Your representative advised that he would discuss
the
proposal with you. We asked to be contacted by June
1, 2001
[sic]. On May 26, 2004 we sent and faxed a letter to
your
representative outlining the terms under which we could
consider
an installment agreement. On June 1, 2004, your representative
contacted us and advised that you could not meet the
terms of
our proposal. He asked us to issue a notice of determination
to
you.
Discussion
[HN1] Before a levy can be made on any property or
right to property, the
Commissioner is obligated to provide the taxpayer with notice of the
Commissioner's intent to levy and notice of the taxpayer's right to a
fair
hearing before an impartial officer of the Appeals Office. Secs. 6330(a)
and (b)
and 6331(d). If the taxpayer requests a section 6330 hearing, he or she
may
raise in that hearing any relevant issue relating to the unpaid tax or
the
proposed levy, including appropriate spousal defenses, challenges to the
appropriateness of the collection actions, and "offers of collection
[*19]
alternatives, which may include the posting of a bond, the substitution
of other
assets, an installment agreement, or an offer-in-compromise." Sec.
6330(c)(2)(A)
. A determination is then made which takes into consideration those issues,
the
verification that the requirements of applicable law and administrative
procedures have been met, and "whether any proposed collection action
balances
the need for the efficient collection of taxes with the legitimate concern
of
the person that any collection action be no more intrusive than necessary."
Sec.
6330(c)(3).
In this case, petitioner's position is that respondent
abused his discretion
in the subject notice of determination, which sustained the proposed collection
action for 2000 and 2001, because respondent refused to process petitioner's
offer-in-compromise. Thus, [HN2] the only issue in this case involves
a
collection alternative, petitioner's offer-in-compromise. We review the
determination for an abuse of discretion because the underlying tax liability
is
not at issue. Lunsford v. Comm'r, 117 T.C. 183, 185 (2001); Nicklaus v.
Comm'r,
117 T.C. 117, 120 (2001).
[HN3] Section 7122(a) authorizes the Secretary [*20]
to compromise any civil
case arising under the internal revenue laws. The regulations set forth
three
grounds for the compromise of a liability: (1) Doubt as to liability;
(2) doubt
as to collectibility; or (3) promotion of effective tax administration.
Sec.
301.7122-1(b), Proced. & Admin. Regs.; see sec. 7122(c)(1). Neither
doubt as to
liability nor doubt as to collectibility is at issue in the instant case.
[HN4] The Secretary may compromise a liability to promote
"effective tax
administration" when: (1) Collection of the full liability would
cause the
taxpayer economic hardship within the meaning of section 301.6343-1, Proced.
&
Admin. Regs.; or (2) exceptional circumstances exist such that collection
of the
full liability would be detrimental to voluntary compliance by taxpayers;
and
(3) compromise of the liability will not undermine compliance by taxpayers
with
tax laws. Sec. 301.7122-1(b)(3), Proced. & Admin. Regs.; see 2 Administration,
Internal Revenue Service (CCH), section 5.8.11.2, at 16,385-3 (taxpayer's
liability may be eligible for compromise to promote effective tax administration
if the taxpayer is not eligible for compromise based on doubt as to liability
or
doubt as to [*21] collectibility, and taxpayer has exceptional circumstances
to
merit the offer). Under section 301.6343-1(b)(4)(i), Proced. & Admin.
Regs., a
levy creates economic hardship "if satisfaction of the levy in whole
or in part
will cause an individual taxpayer to be unable to pay his or her reasonable
basic living expenses."
Petitioner contends for three reasons that respondent
abused his discretion
by refusing to accept petitioner's offer-in-compromise. First, petitioner
contends that the Appeals officer "was without basis in determining
that Mr.
Dostal was in substantial non-compliance." As we understand petitioner's
brief,
he complains that the Appeals officer "declined to consider"
his
offer-in-compromise because of petitioner's "noncompliance with tax
filings."
Petitioner emphasizes that, contrary to the determination of the Appeals
officer, he "has filed all of his prior tax returns, including a
validly filed
automatic extension for his 2003 tax return and the 2003 return itself."
Petitioner acknowledges that his attorney had thought that his tax liability
for
the year was $ 70,000. Petitioner notes that, in fact, the liability "was
actually much lower and taxpayer has paid the liability. [*22] "
Second, petitioner asserts that the Appeals officer
abused her discretion
because she "summarily rejected" the offer-in-compromise "and
demanded the
taxpayer enter into an installment agreement." According to petitioner
the
Appeals officer took this action "without making the required financial
analysis." Petitioner contends that the Appeals officer "rejected
this offer
outright because the taxpayer's OIC (offer-in-compromise) showed the ability
to
pay the taxes in full." Petitioner complains that
the IRS failed to even consider what affect [sic]
on the
taxpayer, and his family, would be [sic] by him using
his meager
retirement account to satisfy the tax obligation, and
insisted
that the 2003 obligation be cured, and that a sub-stantial
down
payment be made on the 2000 and 2001 tax liability
amounting to
$ 139,000.00 as of June 1, 2004.
Petitioner also complains that the Appeals officer
failed to take into
account the "schedules of national and local allowances", referred
to in section
7122(c)(2), and failed to determine, based upon the facts and circumstances
of
this case, whether it was appropriate to use those schedules. [*23]
For his last reason, petitioner argues that "the
financial information
clearly showed that the IRS' settlement demands would be an undue hardship
on
the taxpayer and his family, and basically force them into the streets."
In
effect, petitioner is arguing that collection of the full liability for
tax
years 2000 and 2001 would cause petitioner and his family economic hardship
within the meaning of section 301.6343-1, Proced. & Admin. Regs. Thus,
it
appears that petitioner is relying on section 301.7122-1(b)(3)(i), Proced.
&
Admin. Regs., to support his contention that respondent should have accepted
his
offer-in-compromise. Petitioner has identified no "compelling public
policy or
equity considerations", applicable to his tax liability for taxable
years 2000
and 2001, that would provide a basis to apply section 301.7122-1(b)(3)(ii),
Proced. & Admin. Regs.
We disagree with each of petitioner's points and, for
the reasons set out
below, we find that the determination to proceed with collection of petitioner's
tax for 2000 and 2001 was not an abuse of respondent's discretion. First,
contrary to petitioner's assertion, the Appeals officer did not suspend
her
consideration of the offer- [*24] in-compromise because petitioner had
failed
to meet his filing requirements. Rather, the Appeals officer took that
action
after petitioner's attorney disclosed that petitioner's unpaid tax liability
for
2003 was $ 70,000. The Appeals officer had no reason to doubt this disclosure
and no way of knowing that petitioner's return, when it was filed approximately
5 months later, would report an unpaid tax liability of $ 5,160. In response
to
that disclosure, the Appeals officer advised petitioner's attorney that
she
could no longer consider the offer-in-compromise because petitioner had
not
complied with the "payment requirements" for his 2003 return.
In this case, we cannot fault the Appeals officer for
her concern about the
fact that petitioner had, according to his attorney, allowed a substantial
additional tax liability to accrue for 2003 without payment. For example,
in
Orum v. Comm'r, 412 F.3d 819, 821 (7th Cir. 2005), affg. 123 T.C. 1 (2004),
the
court stated as follows:
It would not do the Treasury any good if taxpayers
used the
money owed for 2004 to pay taxes due for 1998, the
money owned
for 2005 to pay taxes for 1999, [*25] and so on. That
would spawn more
collection cycles yet leave a substantial unpaid balance.
The
Service's goal is to reduce and ultimately eliminate
the entire
tax debt, which can be done only if current taxes are
paid while
old tax debts are retired. Whether that goal is best
achieved by
levy rather than by allowing second chances is the
sort of
decision committed to executive officials. * * *
As the court noted in the above case, [HN5] a taxpayer's
failure to keep
current on his tax payments suggests that the taxpayer had decided "to
prefer
consumption over meeting [his] legal obligations." Id.
Second, petitioner's assertion that the Appeals officer
"summarily rejected"
petitioner's offer-in-compromise is contradicted by the record. The stipulation
of facts filed by the parties states that the Appeals officer "reviewed
the
offer-in- compromise and supporting information which had been submitted
to the
Memphis Service Center." Furthermore, the Appeals officer's first
letter to
petitioner states as follows:
I have reviewed your offer and the financial documentation
submitted by your representative. It does not appear,
[*26] based on
upon [sic] the provisions, conditions, and examples
provided in
the Internal Revenue Regulations section 301.7122-1(c)(3)
and
the Internal Revenue Manual section 5.8.22.2(4), that
you
qualify for an effective tax administration offer in
compromise
due to economic hardship.
According to the attachment to the notice of determination,
the Appeals
officer also advised petitioner's attorney during their conference that
petitioner had not demonstrated undue hardship as defined by section
301.6343-1(b)(4)(i), Proced. & Admin. Regs. At that conference, the
Appeals
officer suggested that petitioner consider "an installment agreement
and/or
liquidation of your retirement accounts in order to satisfy the tax liability."
The Appeals officer also sent petitioner and his attorney a letter setting
forth
certain conditions, such as full payment for petitioner's 2003 tax liability,
to
continue consideration of collection alternatives. Our review of the record
fails to show any basis for the assertion that the Appeals officer "summarily
rejected" petitioner's offer-in-compromise.
Finally, we do not agree with petitioner's assertion
that collection [*27]
of the full tax liability for taxable years 2000 and 2001 would cause
petitioner
and his family economic hardship within the meaning of section 301.6343-1,
Proced. & Admin. Regs. The financial information petitioner submitted
with his
offer-in-compromise demonstrates that petitioner had a robust earning
capacity
through his stock brokerage business. The Form 433-A submitted with petitioner's
offer-in-compromise suggests that his income exceeded living expenses
by $ 9,428
per month before income taxes. Certainly, monthly income in that amount
is more
than enough to finance the payment of petitioner's unpaid taxes for 2000
and
2001.
Petitioner's contention that he faced economic hardship
from collection of
his full tax liability for taxable years 2000 and 2001 appears to be based
upon
the assertion that he planned to retire from his stock brokerage business.
In
that event, as we understand petitioner's contention, he would have no
business
income, and collection of his full tax liability for 2000 and 2001 would
deprive
him of those assets and a means of support for himself and his family.
We note
that petitioner's retirement is not required for health reasons or any
external
cause. [*28] Petitioner's complaint boils down to the fact that if collection
of his full tax liability for taxable years 2000 and 2001 is required,
then
petitioner will have to delay his retirement plans. We agree with the
Appeals
officer that petitioner has not shown that requiring full payment would
cause
economic hardship.
To reflect the foregoing,
Decision will be entered for respondent.
APPENDIX
Taxable Year
2000 2001 2002
2003
____________
____ ____ ____
____
7 Wages --
$ 27,000 $ 48,600 $ 16,200
8 Taxable interest $
401 421
143 34
Tax-exempt interest
9 Ordinary dividends
-- 150 --
1
10 Taxable refunds, etc. --
-- --
--
11 Alimony received
-- -- --
--
12 Business income [*29] or (loss)
140,997 -- --
--
13 Capital gain or (loss) 279,089
-1,500 -1,500 -1,500
14 Other gains or (losses) --
-36,535 --
--
15 Total IRA distributions 53,400
110,035 29,000 --
16 Total pensions and annuities
-- -- --
--
17 Rental real estate, royalties,
-- 120,954 78,408 96,881
partnerships, S corps., etc.
18 Farm income or (loss) --
-- --
--
19 Unemployment compensation --
-- --
--
20 Social Security benefits
-- -- --
--
21 Other income _______
_______ _______ _______
22 Total income 473,887
220,525 154,651 111,616
23 IRA deduction --
-- --
--
24 Student loan interest deduction [*30] --
-- --
--
25 Medical savings account deduction --
-- --
--
26 Moving expenses --
-- --
--
27 One-half of self-employment tax 8,501
-- --
--
28 Self-employment health ins.
deduction
2,784 -- --
1,776
29 Self-employed SEP, SIMPLE, and 25,500
-- --
6,480
qualified plans
30 Penalty on early withdrawal of
savings --
--
1,243 --
31 Alimony paid
________ ________ ________ ______
32 Total adjustments 36,785
--
1,243 8,256
33 Adjusted gross income
437,102 220,525 153,408 103,360
Itemized deductions 84,239
52,748 82,016 38,382
Exemptions
-- --
540 6,100
[*31] ________
________ ________
______
Taxable income 352,863
167,777 70,852 58,878
Tax
120,464 51,622 16,468
11,575
Self-employment tax 17,001
________
________ ________ ______
Total tax
137,465 51,622 16,468
11,575
Federal income tax withheld from
-- 10,692 19,246
6,415
Forms W-2 and 1099
Estimated payments
-- -- --
--
________
________ ________ ______
Total payments
-- 10,692 19,246
6,415
Amount owed, not including 137,728
40,930 --
5,160
estimated tax penalty
Amount overpaid --
-- -2,778
--